Hutch Hutchison was on a high-end remodeling project, adjusting a sticking door, when the homeowner flew off the handle. Why, he demanded, was this taking so long? Why wasn't it done right the first time? If he ran his business this way… A veteran construction superintendent with Hobbs Inc., Hutchison was used to dealing with wealthy and prominent clients. The company had long been a favorite with the carriage trade of Fairfield County, Conn. But this client was bigger than big-time, a household name, head of one of the world's largest corporations. So when he lost his cool, Hutchison might well have been intimidated. But rather than accept verbal abuse or, worse, lose his own temper, Hutchison simply picked up his tools and walked out of the room. “When you're ready to discuss this reasonably,” he said, “come and get me.” Before long the client calmed down, and Hutch was able to explain that the door had to fit little bit tight to keep out the wind off the water, and that you had to work the handle like this… And while the owner may not have expected a lesson in manners from a construction worker, the incident did not sour relations on the job. In fact, the two men went on to become close friends. Both were private pilots, it turned out. They ended up flying planes together.

Every company collects stories about itself. They constitute a kind of oral history, the means by which a company defines and perpetuates its own culture. Ask anyone at Hobbs Inc. about Hutch, and you'll hear about the day he stood up to one of the most powerful men in the business world and made a friend out of him. The story says a lot about Hutch's character, his confidence in his skills, and his sense of his own worth, traits that made him a role model at Hobbs Inc. But it also speaks volumes about the company itself, because Hutch has been retired for five years. The incident of the door occurred about 20 years ago, before some of the people who tell it had graduated from high school. One of them is Scott Hobbs, the man who now runs the company. “Hutch worked for my grandfather, my father, and me,” says Hobbs.

The world of custom building is full of second-generation, and even third-generation, craftsmen. But third-generation companies are rare. Building a business sound enough to survive a single generation is tough in itself. Raising a child interested in and capable of taking over adds a large element of chance and a further level of difficulty. By simply making it to the third generation as a successful company, then, Hobbs Inc. represents something of a standout in the industry. But Scott Hobbs has not been content with this generational hat trick, impressive as it might be. Since taking over the CEO spot in 1999 at the age of 31, he has plotted a course of ambitious but carefully controlled growth. Leveraging the family company's sterling reputation and solid-gold client base, he diversified into remodeling and estate management and expanded into new geographical markets. He modified the company's management structure and systems to handle the rapid increase in volume and leveraged its new economic power to offer big-company benefits and hire full-time human resources and safety managers. Most importantly, though, he leveraged the human capital of people like Hutch Hutchison, who represent the legacy of his grandfather and his father. Building on that legacy, he has transformed an already first-rate outfit into one of the most formidable custom building companies in the country.

Ted Hobbs, Scott's grandfather, got the ball rolling in 1945. After working as a government construction engineer during World War II, Hobbs says, “He started out with another guy and a hand roller, pressing driveways. And from there he went straight up.” Over the next three decades he tackled a wide range of projects: spec housing, custom homes, commercial buildings, and condominiums. What distinguished Ted Hobbs' way of doing business was not what he built, but what his grandson calls “golden-rule management.” Put simply, Ted Hobbs treated people well. He delivered on his promises to clients, paid his subcontractors on time, and took care of his employees. Among other things, he was far ahead of his time in stressing jobsite safety. Ted's son Mike joined the company in 1968, after a stint in the Air Force. At 35, he brought considerable outside work experience to the company, experience that would serve him well, because he would be running the show perhaps earlier than he expected. In 1975, Hobbs says, Ted's doctor predicted that he would be dead in a year if he did not retire. “He came back to the office,” Hobbs says, “cleaned out his desk, and said, ‘Mike, you're in charge.'” Setting an important example for the family business, he meant what he said. In the coming years he scrupulously refused to interfere with his son's conduct of the business. And he had plenty of opportunities to butt in; he lived another 23 years, to the age of 84.

While the handoff was clean, though, for Mike the timing could have been better. He took over, recalls his son, “During the real dregs of the 1970s.” But Mike had no intention of simply waiting out the recession. “One thing my father was kind of visionary at was expanding during down times,” Hobbs says. In the midst of the economic malaise of the time, Mike decided to position the company for the recovery that he believed would inevitably follow, focusing on bigger custom residential projects. It was a smart move. The company's base, Fairfield County, takes in some of the East Coast's most desirable bedroom communities. When custom building took off in the 1980s, Hobbs Inc. took off too, building bigger, more detailed houses and more of them. By the late 1990s, the company's average project was worth over $2 million.

Scott Hobbs, along with brothers Ian and Michael Jr., had worked in the family business during summer school breaks, liked the work, and thought he might end up as a builder. But he followed his father's lead in working first outside the company. After graduating from Duke University he joined the Army as an armor officer stationed in Colorado Springs, Colo. After the Gulf War, with the military facing budget cuts, he decided that the family business might offer better prospects than driving a tank, so he took up another Hobbs family tradition: starting at the bottom of the ladder. “In 1992 I came back to New Canaan [Conn.] and started working as a laborer, carpenter, superintendent, just getting a feel for the outside,” he says. Soon, he was doing project management and studying for an MBA from Columbia University. It had been understood when he came back to the business that he would eventually take over, but as Hobbs says, “I don't know if you're ever ready to take over a CEO role.” When his father retired in 1998 and his turn came, he was 31 years old, a tender age to be asking a client to hand over millions of dollars. “While I wore the Hobbs name,” he says, “there was a lot to prove.” The confidence and managerial skills he had gained in the Army would prove invaluable. “At a relatively early age I was put in charge of lots of resources and people, most of whom were older, more experienced, and more skilled than I was.”

Trim and slightly graying, Hobbs retains the upright posture and steady eye contact of a military officer. And judging by the evidence, he is not shy about taking command. Under his father, the company had grown to a 10-project capability: 10 superintendents, each working a single project, and enough project managers to handle roughly two projects at a time. Hobbs quickly increased project capacity by 60 percent, adding three additional superintendents in the New Canaan office and opening a new office in nearby Bedford, N.Y., with three more. Under his father, project managers reported directly to the boss; the company's expanded production capability would require a parallel expansion on the management end.

Hobbs split his project-oversight responsibilities between two “project executives”: his brother, company vice president Ian Hobbs, and chief operating officer Walter Lorenz, who had joined the company as an estimator the same year that Hobbs returned from the service. The lighter load of project oversight freed Hobbs up for a job that many custom builders are simply too busy to do: leading the business rather than simply running it, directing its growth rather than simply responding to it. “I'm really trying to handle the strategic vision of the company,” he says. Hobbs' gaze soon fell on the small projects the company had long taken on as a service to prior clients. “We weren't doing them that well. The clients weren't that happy, it was really inconvenient for us, and we weren't making money on it. So everyone was losing.” But Hobbs saw this problem child as a potential profit center. “We made a choice in 2001 to expand our capabilities beyond the new houses and significant renovations,” he says. Success at this level of the business would require a substantially different business model, Hobbs recognized, but diversification—“existing in several parallel planes”—would be good for the health of the company. And the market opportunities were enough to make an independent remodeler swoon. The smaller projects are driven by “prior client demand,” Hobbs says. Hobbs Inc. has a client list 50 years long. “And we're churning out 16 houses a year. That's a lot of prior clients.” Interest was high enough that the small projects initiative quickly evolved into two separate divisions: Hobbs Personal Estate Management (PEM), which handles single-trade maintenance and repair jobs, and Hobbs Distinguished Additions and Renovations (DAR), which tackles more complex projects, up to a ceiling of about $500,000. After only three years in business, DAR has grown to an annual volume of over $11 million. In 2004, PEM brought in $2.5 million, pushing the company's total volume to $65 million.

But every entity that grows is subject to external limits. “You can get big enough to saturate a market,” Hobbs says, “and we may be reaching that point.” So in addition to diversifying his offerings in his existing market areas, Hobbs is opening a third office. Located across Long Island Sound in Bridgehampton, N.Y., the new beachhead will tap the extremely active Hamptons high-end market. “We discussed with architects whether this worked in the area, and they said yes, there was a niche for this out there,” says Hobbs, who then made an unusual commitment for a new builder in town. “We bought an office building. It really helped show people that we are serious about coming to the Hamptons and staying.”

Growth at Hobbs, Inc., has been swift, but by all evidence it has also been carefully controlled. Activity at the company's office proceeds at a pace that is brisk rather than hurried. A shelf in a project manager's office holds a dozen neatly bound 6-inch-thick volumes, the documents for a 20,000-square-foot house. “And that's just the printed files,” Hobbs notes. A hallway bookcase is filled with audiotapes—sales and motivational subjects, mostly—that the office staff uses during travel time. Take away the thick rolls of plan drawings, the framed magazine covers with photos of Hobbs projects, the wall full of jobsite safety awards, and one would be hard pressed to identify this as a construction operation.